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Direct materials flexible-budget variance
Difference between the total direct material cost and the flexible budget amount
Direct materials price variance
Difference between the actual and standard cost per unit of direct material multiplied by the quantity of direct materials used during the project. It can be misleading, as cheaper materials could lead to more downstream problems; buying in bulk has an impact too, as it might look good but represent higher warehousing costs
Reasons for direct materials price variances (4)
- not taking purchasing (bulk) discounts
- unexpected price changes
- changes in freight costs
- variations in grades of materials
Materials usage ratio
The ratio of quantity used over quantity purchased
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